5 Rules of Being Successful in the Stock Market

Are you looking for the secret guide on how to be successful in the stock market? By now you already know that stock market is very unstable so you need to stop searching because a guide like that does not exist. There are dozens of factors such as inflation, demographics, the economic strength of market and peers, trends, etc. that can change the stock market in minutes.

With this amount of diverse factors, it is hard to come up with a set of rules that can guarantee 100% expected return. However, there are certain steps that can lead to success. Read along to find out the 5 golden rules of becoming the Wolf of the Wall Street.

How to Be Successful in the Stock Market

1. Research, study, repeat

If you chose to invest because you don’t want to study but want to earn money then, unfortunately, you are on the wrong path. The stock market is not the stock tracker on your iPhone. It’s way more than that. Studying the basics of the stock market will help you a) make the right decision, b) you will not be deceived. In the 21st Century, you can get access to well-written books, articles and research reports about Stock Market.

They are free and teach the essentials. If you don’t like learning the theory then turn to examples, study great investors such as Warren Buffett, Philip Fisher, John Neff and many others. If you still think you have space to grow then buy investment newsletters, take classes and go to seminars. This is actually the best way of getting an insight into the stock market, and you can learn the ins and outs of the market.

2. Invest in what you understand

Let’s set this clear since the very beginning: there is no area that you cannot convert into trading information. If you invest in something you are interested in and have knowledge about then congratulations you are one step ahead of stockbrokers. You don’t believe me?

You will definitely believe Warren Buffett, the third-richest person according to Forbes. His advice to everyone is, “don’t understand the business, don’t buy it.” Stock Market is all about making choices, if you made a good one you will succeed, if not failure is on its way. Granted, you work in IT sector so you are well aware of current trends and the future view. Go ahead and invest there because that way you will make a knowledgeable decision and get expected returns.

3. Make a plan and stick to it

Don’t you feel frustrated when you have not planned your day and you do everything spontaneously? I am sure you do. Stock investment itself is overwhelming so don’t make it even harder. You need to determine your actions beforehand. Start with an assessment of your funds, resources, and possible risks of course. Think of your expectations and compare them with the results of your assessment, it will help you come up with a strategy that will work just fine for you. You can go even further and have a backup plan so that unexpected drops and crashes will not be devastating. The bottom line is you will be very confident if you have a thoroughly detailed plan with clear goals and evaluation.

Think of your expectations and compare them with the results of your assessment, it will help you come up with a strategy that will work just fine for you. You can go even further and have a backup plan so that unexpected drops and crashes will not be devastating. The bottom line is you will be very confident if you have a thoroughly detailed plan with clear goals and evaluation.

4. Invest Surplus Funds

Perhaps you have read this 1001 times but I have to repeat it again. The stock market is risky and if you decided to invest then be aware of all the possibilities. In the stock market, you need to think about the worst case scenario. You invest money to gain profit, not debts so do not invest your monthly salary or your savings because if you lose, you lose big. Sit down and analyze your finances: what are your annual costs, how much can you afford to lose

5. Don’t try and time the market

You have done your research, you want to invest in foreign markets since you are familiar with it, you have a perfect plan and funds so you go ahead and sign the deal. There is one step missing here – timing. Market timing basically means predicting the future and buy or sell assets based on it.

Rome wasn’t built in a day and your investment will not increase in a day either. You might get lucky once or twice but it is not sustainable, in fact, predictions are more likely to lead to loss rather than gain.

Important Note: Stock Market Simulations

Thanks to current technological advances, you can run Stock Market Simulations to better understand how everything works in practice. You can create an online broker account and make your first trade. Don’t go big, start with small shares until you feel comfortable with the process.

The stock market is a roller-coaster and deciding to ride it is a hard. If you are very assertive of your decision then remember these rules as they will help you make the process a lot smoother.

About Guest Contributor

This article was written by a guest author. For more information about this author, please see the bio information listed in the article. If you would like to write an article for Money Q&A, please visit our Guest Posting Guidelines page.